(Bloomberg) -- Traders are racing to move barges of diesel and gasoil up the Rhine River, one of Europe’s key shipping arteries, as declining water levels caused by a dry spell impede transport.
Cargoes of the fuels moving inland from the river’s mouth in the Netherlands have jumped by 50 percent since May, according to estimates from researcher PJK International BV, which regularly tracks the flows. Barges are now hauling 150,000 tons of the fuels a week -- equivalent to 160,000 barrels a day -- from the Amsterdam-Rotterdam-Antwerp oil trading hub. That compares with 100,000 tons a week last month.
“Demand is quite high due to falling water levels,” PJK operations manager Lars van Wageningen said in a phone interview. “Quite some diesel is flowing inland.” Cargo flows are expected to continue rising into next week, he said.
Vessels moving along the 750-mile (1,200-kilometer) Rhine are contending with a spate of hot weather that has shrunk water levels and sent shipping rates soaring. Because of the low levels, each barge can carry only about two-thirds of its total capacity to the upper part of the Rhine, Rotterdam-based brokerage Riverlake Barging said on June 25. That means more vessels are needed to transport the same volume of goods.
The river’s height at Kaub, Germany, a bottleneck point, has dropped for the past 12 days. It’s now just below 1.5 meters, the lowest for the time of year since 2014, data from the German Federal Waterways and Shipping Administration show.
That occurs as independently held stockpiles of diesel and gasoil in the oil trading hub known as ARA are at about 2 million tons, the lowest for the time of year since 2013, according to PJK. Meanwhile, the cost of shipping gasoil to Basel, Switzerland, from ARA has jumped by 47 percent this week to 25 Swiss francs per ton, the firm’s data show. Diesel and gasoil are both middle distillate fuels, and the terms are sometimes used interchangeably.
Inland demand may be set to remain strong in the coming months. Future prices for gasoil have flipped to a premium against current rates -- a market structure known as contango -- after being in backwardation, the opposite structure in which current prices are higher, since early April. Gasoil for August is now worth $1 per ton more than that for July, compared with a $4.25 per ton deficit a month ago, according to data from ICE Futures Europe.
Low stock levels and contango are resulting in increasing volumes to the German and Swiss markets, Riverlake Barging said in a research note on Friday. “Rhine water levels continue to drop. With hardly any rainfall, limited melting water and low ground water levels, the situation could persist for a while,” it said.
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